Well of Course 1 in 2 Americans Are Poor or Low Income, Naturally, it's Obvious

There's much shock and horror at a report that 1 in 2 Americans are poor or low income. I'm really not sure why this causes such shock and horror. It's obvious, simply a natural outcome of the way that the numbers are calculated.

The subject has come up because here I talked about the Waltons (no, not John Boy, the retailing family) and the percentage of US wealth that they controlled. In the comments I was urged to read this report that would shame me into thinking more seriously about the scourge of poverty and how it affects Americans.

Census shows 1 in 2 people are poor or low-income Nearly half of Americans are low-income as rising expenses, unemployment shrink middle class

Now no, I'm not about to try and say that everything is just peachy. Yes, economic times are bad and yes said economic bad times are causing real pain to millions, tens of millions of people out there. However, let's try and keep a grip of our sense of proportion here shall we?

About 97.3 million Americans fall into a low-income category, commonly defined as those earning between 100 and 199 percent of the poverty level, based on a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty. Together with the 49.1 million who fall below the poverty line and are counted as poor, they number 146.4 million, or 48 percent of the U.S. population. That's up by 4 million from 2009, the earliest numbers for the newly developed poverty measure.

That's the core of the matter. The number of people with incomes from zero percent of to 200 % of the poverty line amount to, let us use rough numbers about this, 50% of the US population. We are at this point expected to fall about in shock and horror at the failures of capitalism. No doubt we can get in a bit about the unfairness of it all, how Wall Street is stealing everything and if we really try I'm sure we could manage to blame Republicans, corporations, offshoring and the Chinese as well.

However, quite why anyone wants to come down so hard on simple math I'm not sure. Bit tough on arithmetic to blame it for the Republican Party.

What we need to understand is how have we reached this number? Well, let's start with the poverty line that is being used here. This is the new one, the one that includes most of the things that we try to do to alleviate poverty. So it's not, like the old one, missing out most of those things that we do already do to try and make poverty less painful.

OK, that's fine. Now, how are we calculating this new poverty line? Well, actually, it's a relative number. If the country gets richer then the poverty line rises. If everyone gets poorer then the poverty line falls: nothing wrong with this as long as we know that's what is going on.

This new poverty line is a description of where on the income spectrum you fall, it is not a measure of some absolute standard of living, nor indeed a measure of some absolute level of poverty.

OK, so now we know that, what actually is this new poverty line? The numbers are here:

(Apologies, that table didn't come out quite right). Now, these numbers are for the four person family, two adults two children. The next thing we need to know is what is median household income? From over here we can find that it is $50,000 and change ($200 more or so in fact). We also see that the average household is in fact 2.6 people, not the 4 people that are used in the poverty line figures.

It's beyond my capabilities in the social sciences to work out from this paper what the correct adjustment is from a two adult two child family to a two adult one child (or even 0.6 of one) so I'm afraid you're on your own on that one.

However, we do now, ignoring for the moment that adjustment in household size, have the information we need to understand why some half of all Americans are living in poverty or have low incomes.

Because that's the way that we've defined being in poverty or having a low income. Just to walk through it.

The median is the middle value: if we lined up the incomes of all the households in America then the median household income is the one in the middle. 50% of households have more than this income, 50% less (OK, it's 49.9999% on either side but you get the point).

As it happens, with our new poverty number, we have decided that the poverty line is around 50% of this number. And we've also decided that "low income" is from 100% of the poverty line to 199% of the poverty line. That covers nicely the gap from the poverty line to median income.